Arbusers

There are several views and several models we could use in order to determine value. When a number of these models are aligned, the odds are with us. When there is no alignment at all, we are in doubt.
Another favorite quote says when in doubt, zoom out.
So now I will once again present another technical view, that contradicts my previous post. This time I am adopting a logarithmic scale which has the ability to take out a lot of noise. What we see in this chart is that the 2017 ATH is not that high actually. Yes indeed, BTC price went up to 20000, but, how long did it stay there? And there is another mind-blowing question, is USD value, the same like 2017, and how could we fit in this view the devaluation of the currency.
What we see in this chart, is that we have an important resistance at 14000. In addition, we have noticed since the start of the Covid 19 war, that BTC price is moving upwards in steps of 2000 each. The 14000 price coexists with a 2000 height step and this makes the importance of this resistance even bigger.

What are the conclusions that we get from all these?
Maybe it worths buying some BTC now, only to sell right before 14.000.
When the 14.000 barrier breaks conveniently, the move upwards will accelerate.

In my mind, we are in another bull market for BTC, most probably a new 4year cycle triggered by the biggest danger for our wealth called American socialism (or communism). The immense money printing and devaluation of USD is forcing individuals and corporates to protect their accumulated wealth. However, we can't simply declare a 4years cycle without keeping in the back of our heads that the market might trick us. That is why we try to align models and views, so we take a bet with good odds.

In addition, staying out of the market is a mistake. Be careful here, when I say market, I do not necessarily mean BTC, it could be anything spanning from real estate to collector's pieces. There is a reason why we are focusing on BTC lately because we identify good odds. If these odds will be found in collecting stamps, then we will definitely speak about stamps.

Once again, information is not intended to be and does not constitute financial advice or any other advice. Information is general in nature and is not specific to you. You should not make any decision, financial or otherwise, based on any of the Information without undertaking your own due diligence.

Because of the pandemics and the risks/opportunities created, I dived deeper into the crypto sphere. What I know now is much more valuable than what I knew before March. So far, we managed to have decent profits from investing in BTC. I know our friend Balls of steele is getting frustrated with this, but while pocketing our profits, we missed significant opportunities to pocket even more. This is called ''unrealized potential'', others call it ''missed potential profits''. The unrealized potential has a deep psychological impact and for this I am referring you to Ammos and Tversky. At the same time, I am expecting experienced value bettors and arbers like the members of our community, to be able to omit this psychological impact by default. These are hard words, but If you can't omit this impact, you still have a lot to learn.

That was a long introduction indeed.

I am coming back to BTC as an investment or speculative asset. Even though there are good odds for a long positive cycle, one's position depends largely on the investment profile among other characteristics. Long story short, if your horizon is long and you are ready to keep a position for a substantial time, then go on and buy it right now, at 12900$. The odds are for you, in the long run. My analysis shows that we will have a time of consolidation, before jumping above 14000$.

It might worth it to start an imaginary portfolio that would include cryptos, stocks, and other assets, and then compare it with the international markets. At this point in time, I believe that some 10% of investment capital should be in cryptos. Further distribution of this 10% would mean 80% BTC and 20% ETH.

We had the monthly close of October 2020 yesterday. As you can see in the following chart, this close is very near the ATH of monthly closes that we had on the top of the previous bubble. For the records, the 2017 bubble went indeed up to 20.000$ but stayed there only for a short period of time. That is why one has to be vigilant to buy/sell at the right time. The market is not offering the luxury of time surplus.



The current level is a decision point. There are 3 options from here, and let's examine them.

1. BTC price repeats previous behavior and goes down rapidly. That is OK with us, we can buy some more in a DCA style.
2. BTC price moves with small ups and downs but remains close to the 14.000$ resistance. Still OK with us, we can buy some more if we go to 13 or 12K, waiting for the final move up.
3. BTC price smashes the 14k barrier and moves towards the next level of 20k. In this case, we are ready to sell some of our positions if we reach that level.

Given that we entered a new market cycle that will bring us to much higher levels of prices, I believe we will stay at this level for some more time until BTC gets new momentum to break the 14k level and move up to 20k. This gives us more time to accumulate more ETH and BTC. Notice, that we are looking for a portfolio of 80/20 BTC/ETH. ETH tends to perform much better when BTC stays in a short range of prices without extreme ups and downs. In addition, we believe that while BTC prices are generally going up, it occupies a smaller part of the total Cryptocurrencies CAPEX.

arbusers wrote:
3. BTC price smashes the 14k barrier and moves towards the next level of 20k. In this case, we are ready to sell some of our positions if we reach that level.

This statement makes me think that BTC might not be such a great long term investment opportunity. I believe pretty much everyone has similar strategy as you do, waiting till BTC reaches new level and then start selling position at a profit. And when it happens the price will rapidly go down once again... But what if it happens much sooner before it reaches 20k... I believe it is also the core problem of BTC. It doesn't really have any intrinsic value like company's shares have. Even if the whole stock market goes crazy and people start selling company's shares its stock price will be corrected sooner or later, as long as it keeps producing value to its customers and earns money. This is not true with BTC though. It is completely dependent on how people will react.

At the end of the day BTC is zero-sum game, for someone to massively profit another has to massively lose. I don't know if the price will go up or down, nobody does. However, I do know that sooner or later it has to go down, when the hype will be over and new players will stop coming in. Again, nobody knows when this is going to happen, after 10 years or maybe tomorrow.. You'd better be off that position when it happens, this game is difficult and dangerous.

mrJustice wrote: This statement makes me think that BTC might not be such a great long term investment opportunity. I believe pretty much everyone has similar strategy as you do, waiting till BTC reaches new level and then start selling position at a profit.

If your belief is that everyone has a similar strategy, it means that all bitcoin holders are traders who intend to sell at some point.

I know little about bitcoin, so commenting on this is a bit uncomfortable, but my belief is different. I think that there is a growing fraction of the cryptocurrency holders who are long term investors. Some major investors have begun announcing their bullish view on crypto in recent years. They consider it a means of wealth preservation as a supplement for real estate, gold, etc. - it can even be used as a method of payment in many cases. Due to the scarcity it does not seem vulnerable to inflation like regular currencies, which makes it an attractive asset for them. Volatility seems to be decreasing supporting this statement.

So maybe the amount of Bitcoin traders, who contribute to the volatility, is decreasing?

@VidaBlue Perhaps you didn't read the rest of my post carefully. In it I argue that BTC can't be viewed as traditional investment instrument because it is not backed by anything. You mention gold and real estate, sure but those are tangible assets, you can always be sure that land will have value and gold will have value as a precious metal. You see, these kind of investments are backed by something that has physical value. In BTC it is all about whatever people are going to decide, it's just digits on computer...

I understand that someone wants to diversify their investment portfolio for wealth preservation against inflation. But we already have gold and real estate and BTC doesn't provide any additional benefits here. It only introduces speculative nature which is so attractive to those who want to get rich quick. It is those stories that promise you BTC to rise to 100k in next couple of years which makes it so attractive to those who are guided by greed and not financial intelligence.

And indeed there are some major investors who want to hold BTC long term.  But they do want to trade it at a certain point to make their profit. And like I said, it is zero-sum game, for them to make profit someone has to lose. BTC is not a company, it does not produce revenue... You only make money when someone is willing to pay you more and that someone is hoping that there will be another fool who will pay even more.

Here, most of us don't gamble, we all seek value. And we all need some reference to find that value. In betting we compare sharps against softs to find our value, we use reference. In stock markets you can find value by comparing stock price against company's financial data such as its earnings, debt, margins, etc. That financial data serves as reference there and you can spot value. What kind of reference can we use to spot value in BTC price? None. You can't predict human behavior. Current stock market is great example! The whole economy is broken yet we see stock market reaching its all time high. Who could have predicted that?

Long story short you need some sort of reference to find value. And if investment is not backed by anything then you can't have that reliable reference. Betting is backed by odds. Stock market is backed by performance of company. Gold and real estate are backed by tangible assets. BTC is not backed by anything and thus is purely speculative in its nature. You might as well start day trading or trade forex or better yet start gambling..

I believe it is healthy to have such debate where members of this community can see both sides and decide for themselves which makes more sense to them and what they are comfortable with.

@mrJustice Thank you for answering. Yes, I think I read the rest of your post carefully. I just couldn't understand why you think Bitcoin does not have intrinsic value. You mention tangible asset as well, is an asset only tangible if you can touch it?

And why is it a zero-sum game? It has a purpose, an increasing number of vendors accept Bitcoin as a means of payment to purchase goods. Gold has few industrial uses. It could be a zero-sum game as well if the price dropped to zero, although we know that's very unlikely to happen. People like gold. People like a Screaming Eagle Cabernet 1992 too, but you really don't have to pay §500k to quench your thirst. Yet people think it is worth it.

Maybe such considerations on "intrinsic value" and "tangible asset" guide people into believing in cryptocurrency or not. I consider myself a novice on the subject and has not yet established a strong opinion about it. Your thorough answer certainly has added a bit to the scepticism and I'll throw that into the bucket together with the rest of the information.

The 14k barrier is clearly broken and there is no resistance from here until the 20k.
Those who patiently accumulated BTCs during these last months should be prepared for selling their coins in a DCA style according to how much aggressive they are and how the price behaves.

BTC now at 15k where many sell orders are positioned.

@VidaBlue To answer some of your questions. Indeed, tangible assets are typically physical assets that you can touch, unlike digits on the computer.

Regarding zero-sum game. I am not saying that Bitcoin doesn't have purpose, if fact in the early days it started out as an attempt to fix our monetary policy and make transactions easier and more transparent. I actually liked the idea of Bitcoin when it was about that because clearly our monetary policy has lots of problems and new experiments like Bitcoin were welcomed by me. However, at some point it failed to serve that purpose. People were much more interested in its speculative nature and majority cared only about price going up. There were many times when mining fees were so high that you had to pay more in fees then you were actually sending. And so people embraced this new idea of making Bitcoin digital gold. And that's when it becomes zero-sum game. It no longer has any purpose other than for its price to go up. It doesn't make any revenue, it doesn't pay you dividends it only goes up in price when some new player enters the game and is willing to pay you that higher price. Obviously, at some point there will no longer be new players and those who entered this game last will not be able to sell their positions at a profit and may incur truly huge losses. So as you can see for someone to make profit in BTC there must be always someone else who will pay you that higher price and then that guy has to hope there will be new guy who will buy BTC from him for even higher price. That's what zero-sum game is all about, money can't be made out of thin air.

And you are totally right, in a way gold can be zero-sum game too. Many prominent investors such as Warren Buffet don't like investing in gold exactly because of that reason, i.e. because gold is also not producing anything, no revenue. However, the big difference between gold and BTC though is that even if gold price hits $0 you still get to own that shiny, precious metal. If BTC hits $0 you are left with nothing...

So for me investing in BTC is too uncomfortable. I can't rely on human behavior and I can't see any reliable reference which would indicate to me that I am buying it at a good price and have edge. I see a lot of other great investment opportunities. However, everyone is different, if someone believes he has an edge over other traders and is confident in his analysis then I guess go for it. Just make sure you don't invest money you can't afford to lose.

Thank you guys. I need a down payment for my new home, so I'm selling half of my btc. I've included both your opinions and will try to sell a bit before they reach 20k (if they do) 

Bitcoin has value. Tell me another asset except crypto, where you can send 5 billion dollars to someone without trusting a third party like bank or government.

Wolfie wrote: Bitcoin has value. Tell me another asset except crypto, where you can send 5 billion dollars to someone without trusting a third party like bank or government.

You have 5 billion dollars that you need to send somebody? I wish I had the same problem as you do 

However, it is not that simple with BTC either. First you need to buy BTC worth 5 billion dollars and I seriously doubt there is any cryptocurrency exchange which will accept your 5 billion dollars. And even if they did you still have to trust third party here, i.e. crypto exchange. And also if you were to buy 5 billion dollars worth BTC the price of BTC would go up like crazy and you could potentially incur a lot of loss... So, doesn't seem valuable even for such unrealistic case...

In case you have missed it, 1.1 billion transfered for a fee of 0.68 usd. So this cases not only are realistic but they already have been done. The central idea of my comment is that you can send large amounts of money with no kyc. And you can store whatever value you want just in a piece of paper. Its the only thing in the world which can do this. So it has intrinsic value. To say you can get btc only from btc exchange is same like saying you can get fiat money only in the bank, which is clearly not the case.

Wolfie wrote: In case you have missed it, 1.1 billion transfered for a fee of 0.68 usd. So this cases not only are realistic but they already have been done. The central idea of my comment is that you can send large amounts of money with no kyc. And you can store whatever value you want just in a piece of paper. Its the only thing in the world which can do this. So it has intrinsic value. To say you can get btc only from btc exchange is same like saying you can get fiat money only in the bank, which is clearly not the case.

How else can you get BTC if not first buying it on some cryptocurrency exchange? Unless someone sends you that money but then that person has to be the one who bought it at some cryptocurrency exchange and had to go through KYC... The only other way I can think of would be earning BTC through mining but I think it is not that easy to earn billions of dollars through mining...

Anyway when I say value I mean something that is useful to majority of people. Ability to send billions of dollars would hardly be of any use to most of us, unless I somehow missed the point in time when everyone suddenly became billionaire in this world.

But I guess you do have a point. It can be useful to criminals to send money in much more anonymous way. Btw such value might very well be the reason why BTC has become so popular in the first place, the shadow economy is huge.